Abbreviations I use in the post: PDH: Previous day’s high, PDL: Previous day’s low, IB: Initial Balance or First 1 hour range, NVD: Normal variation day (one of the market profile day types), OTD: open test drive, POC: Point of control, HVN (High volume node)
Observation from previous day:
On Tuesday, Banknifty opened with a gap up in the sellers gap area from Monday above PDH and buyers did try to take the prices up but failed. So, even though this was gap up, there was no follow through on upside. Sellers pitched in and then for almost entire day with a little pullback in I period, prices one-time-framed downside forming a trend down day and closing back inside range. Compared to Nifty, Banknifty was less weaker and was showing relative strength even in down move, so it becomes important to watch the price action in banknifty today and see if it still shows relative strength today or sellers take Banknifty in their control now.
What can be expected now:
We need to see today the levels where prices are getting accepted in Banknfty. In case sellers want to take control, they have to push prices in Banknifty below PDL and below poor low , otherwise there are chances of weekly expiry factor in play today and prices moving sideways. Acceptance below poor low will be a breakdown for banknifty and prices can move further down .
PDH (31780) , VWAP/POC (31410) and PDL (31910) are the levels to look out for from previous day’s range. Above PDH , we can try to test levels of 32000 to close the gap and below PDL, we can test poor low at 30450 and below that 30000 levels. Also, in case if acceptance above PDL or rejection below PDL, we can see prices moving sideways and weekly expiry affect into play.
Trade plan for today:
Banknifty is expected to open near or below PDL and there is not much clarity on open auction and we might probably see a struggle at open due to holiday yesterday and open adjustments. So, there is no trade at open auction. We need to see if prices are getting accepted or rejected below PDL and then decide on the direction on the trade. If nothing is clear and there is volatility, I will probably wait for IB range completion to look for a trade.
- Short trades are risky if prices above PDL.
- No long trade if prices trade below PDL.
- Strength or weakness of Nifty becomes very important for Banknifty today. For taking a trade in either direction, we just need to make sure Nifty price action is also supporting the trade.
Please note that this is a personal view for learning , observational and education purpose and is not a trading recommendation. Trading futures carry a risk, so you should consult a financial expert before taking any risk. Also, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.